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Three Ways to Survive Cutthroat Competition

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Editor's note: This is an excerpt from Philip Betbeze's Sept. 18 online column.

Though building and maintaining a successful and thriving hospital in today's healthcare environment isn't easy and challenges are numerous, cutthroat competition among providers isn't really one of them. But that's likely to change.

Heart care and orthopedics are two examples that have historically been well-reimbursed, of course. But competition among hospitals as reimbursements decline for even these high-dollar service lines is destined to grow ever more fierce—not only because of the greater influence quality and outcomes data are exhibiting on where commercial and government payers steer their patients, but because over the medium- to long-term future, operating margins will be similarly squeezed. Hospitals need to carve out niches in service lines that can effectively compete against their sometimes better-financed rivals. Here are three ways your hospital can survive and thrive.

1. If evidence doesn't support a service line, get rid of it.
Specific demonstration projects exist whose purpose is to cut down on the number of hospitals offering certain high-acuity services, based on the notion that fewer facilities and doctors performing a greater quantity of those services improves patient outcomes. One of CMS' ambitious acute care episode demonstration projects includes Denver's Exempla St. Joseph Healthcare, which is one of four hospitals participating in the cardiovascular portion of the project.

It aims to demonstrate not only that hospitals that share risk and rewards with their physicians can reduce cost and waste, but that hospitals that do fewer of the procedures will wilt under the competitive pressure and choose to close competing heart and orthopedic programs that perform fewer such procedures and do them less well.

2. Treat employees, from broom-pusher to top surgeon, as partners who can help the business run better.
There's waste in your processes, and the longer it goes on, the more inefficient—and less competitive—your hospital becomes. Who knows more about the kinks in your processes than the people who perform them? No one. Find ways to engage these people to reengineer processes that are wasteful. Rewards for rooting out inefficiencies can be effective. So can promises that any inefficiencies uncovered won't result in job cuts.

3. Cost and quality are king.
The protective bubble of operating in a fee-for-service environment is ending. That means it's more important than ever to be a low-cost, high-quality supplier of healthcare services. Make sure you're able to demonstrate to payers why they're better off sending their patients to you for certain procedures that your hospital or system performs well. As time goes on, doing so positions you for better reimbursement in the future.

Having more payment at risk for quality outcomes is both an advantage and disadvantage. It may help you to decide that you're not competitive in a certain service and to discontinue offering it. It may help you stand out and grow while the rest of your competitors eliminate that service. Regardless, you'll be in a better position as accountability receives greater influence on the number of dollars coming in your door.

Philip Betbeze

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